MUMBAI: Reliance Industries Ltd (RIL), India's largest private sector enterprise is likely to report muted earnings growth in the first quarter of this fiscal as gains from its telecom business will be offset by weakness in its retail and refining and petrochemicals business.
According to a Bloomberg survey of 10 brokers, net profit is expected to come in at ₹7,119 crore against ₹10,104 crore in the same quarter last year. Net sales is estimated at to come in at ₹1 trillion, according to a poll by 11 analysts. The company is scheduled to report its earnings on Thursday.
Leads to watch out for in RIL's second quarter earnings:
* GRM outlook after the Covid-19 lockdown
The covid-19 induced lockdown has impacted the petroleum product consumption in India which was down 8% in June. Consequently gross refining margins (GRMs) have been impacted. GRMs are what a refiner earns on processing every barrel of crude oil. During the quarter Benchmark Singapore GRMs were muted (–$ 0.9/bbl) owing to a massive hit on oil demand. Analysts expect RIL's GRM for the quarter to come in between $5 per barrel and $9 per barrel.
* Qatar Investment Authority's investmnet in Jio Fibre
After raising more than $20 billion through stake sales in the digital assets unit, Jio Platforms Ltd, the Mukesh Ambani-led Reliance is now looking to monetize its fibre assets held by Jio Digital Fibre Pvt. Ltd. Sovereign Fund Qatar Investment Authority is in advanced talks with RIL to invest around $1.5 billion in an infrastructure investment trust (InvIT) that holds the company’s fibre-optic assets.
* Revision in ARPU
Effects of tariff hike during the fourth quarter of last fiscal would be visible this quarter. Jio had raised tariff in December along with other telcos. Revenue however, may see some impact of lockdown-led delayed recharges. However, the telco’s lower share of business from international roaming services, compared to peers, is going to prevent a steep Arpu fall. “We project Jio’s subscriber additions to be compressed at 6 million and Arpu to decline 2% Q-o-Q (quarter-on-quarter) to ₹128. Lower interest charge (post-fund raise and debt restructuring in Q4) shall aid profit after taxes growth of 11% Q-o-Q," said Emkay Global Financial Services.
* M&A updates in retail
RIL Chairman Mukesh Ambani had at the company's annual general meeting on 15 July said that its retail division will induct global partners and investors into the company. Reliance Retail is India’s largest and most profitable retail business. Though this quarter may see tepid revenues on account of the covid-19 induced lockdown.